Health officials were rushing Thursday to trace the source of a growing cluster of Covid-19 cases in Australia's largest city of Sydney, with thousands of residents urged to stay home.

Initial reports of five cases on Thursday morning had grown to 17 hours later, as officials worked to uncover the source of the infection in the city's northern beaches.

New South Wales Chief Health Officer Kerry Chant said at an earlier press conference that the cases were "a wake-up call" to Sydneysiders, who had been enjoying a relative return to normal in recent months.

"I think that it's fair to say that mask wearing has declined, with some level of complacency in the population," Chant said.

"And I think this is a wake-up call to urge the community to continue to follow that health advice."

Mask wearing -- although encouraged -- remains optional in Sydney as daily community cases in the country have remained low or at zero for months, allowing a continued rollback of restrictions ahead of Christmas.

NSW Health told around 250,000 residents in the affected suburbs to stay home for three days and urged people to get tested, prompting large queues outside clinics.

Health alerts were also issued for a growing number of venues with one confirmed case in a worker at a retirement village.

The news triggered swift action from several state officials around Australia, with some immediately revising travel rules for those arriving from Sydney.

"I know these changes will cause frustration and uncertainty for some people," Western Australian Premier Mark McGowan said, as he announced quarantine measures and mandatory testing for all travellers arriving from Sydney.

Australia has recorded over 28,000 coronavirus cases and 908 deaths in a population of 25 million.